Trading securities must always be grouped with current assets in classified balance sheets, and held‐to‐maturity investments will be noncurrent (unless the maturity date is within one year). Available‐for‐sale securities may conceivably be classified as either current or noncurrent.
If declines in value are deemed to meet FAS 115's definition of other than temporary, then these are to be included in earnings in the current period. However, subsequent recoveries cannot be recognized in earnings. If available‐for‐sale investments are written down for such impairments that later reverse, the recovery is accounted for as an increase in fair value to be reflected in other comprehensive income account on the balance sheet only. If held‐to‐maturity investments are similarly written down and later recover some or all of the lost value, the fair value increase will not be reported in the balance sheet at all, although disclosure will generally be made in the notes.
For purposes of reporting in the statement of cash flows, all purchases and sales of trading securities must be included in the operations section, while those of available‐for‐sale and held‐to‐maturity investments are to be shown as part of investing activities.
FAS 115 requires specific disclosures of the components of a reporting entity's portfolios of investments. For available‐for‐sale securities and (separately) for held‐to‐maturity securities, classification by type of security ...